Tata Motors - Retail volumes remain strong... - IDBI Capital

- JLR volumes for Jun '12 at 28,215 units were marginally below our estimate of 29k units, up 39%/down 6% YoY/MoM.

- Jaguar volumes were down 5%/12% YoY/MoM to 3,829 units. Though, US volumes for Jaguar were down 26%/4% YoY/MoM to 1,030 units, strong growth in China has kept overall YoY growth intact.

- Land Rover volumes were up 49%/down 5% YoY/MoM to 24,386 units led by continued strong traction from Evoque (9k units in Jun'12). US volumes for LR were up 14% to 3,602 units while robust growth is likely to have been witnessed from China and other emerging markets.

- Our interaction with management indicates lower than expected volumes on delay in dispatches, while retail volumes remained strong at 31.5k units. Mgmt has stated that discounts on JLR products remain lower than peers. The company has maintained its FY13 volume guidance of 100k units for Evoque and 6% volume growth ex-Evoque. We note that incentives on JLR models have gone up over past 2 months, which indicate increased difficulty in selling vehicles. The longer it sustains, the more pressure it will put on JLR margin.

- Management also expects Range Rover dispatches to be under pressure in the coming months ahead of its scheduled new launch towards end CY12.

- Volume performance for peers like BMW, Mercedes and Audi were in the range of 1-13% YoY.

- In case of BMW, overall Europe sales grew 1.5% YoY. US has seen a growth of 3% YoY, while China had witnessed a growth of 13% YoY.

- Mercedes volumes at 121.5k units were up 1%/7% YoY/MoM. Western Europe was down 4% YoY, Asia Pacific was up 5%, while US was up 8%. Japan registered a growth of 15% while China was down 4%.

- Audi volumes at 133.1k units were up 13%/3% YoY/MoM. Overall Europe sales were up 8%. Germany/UK//Spain/Russia registered a YoY growth of 15%/5%/0%/37% respectively while France/Italy saw a negative growth of 10%/18% respectively. US grew 26% YoY while China and India witnessed strong growth of 20% and 76% respectively.

We maintain our long term positive stance on Tata Motors with BUY rating and price target of Rs309, as we believe most concerns with regards to volumes and margin at JLR are in the price. However, given the lack of near term trigger as also pressures on MHCVs/cars in India business, we expect stock to be range bound in the near term.

Source : Equity Bulls

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